Chuo University Speech(Nov 25th, 2011)
"The Structural Transformation of the Game Industry"

 
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III. Innovation and Industrial Transformation

Let me start with some ancient history. Atari was the first company that made computer game available for the general public. In the mid 70s, they introduced PONG, a game played almost like table tennis. Few talented software developers sprung around then, one of the people being Steve Wozniak, the co founder of Apple, who is mentioned in the biography of Steve Jobs. Steve Jobs had an assignment from Atari, and tricked Wozniak into writing the program. In two weeks, Breakout was completed, and was released from Atari. It was a huge hit in Japan, and Taito's Space Invaders was inspired by this game. The person who developed Space Invaders humbly claims that he just copied Breakout, but the game was nothing but inspiration. It was very creative. With Breakout, you had the bricks and the paddle and the goal was to destroy the bricks using a ball. The Space Invaders started with a simple wonder of "what would happen if the bricks started attacking?" Just imagine the bricks attacking the players instead of the other way around. Hiding behind the cannon was also a revolutionary idea. It was a huge hit. It was around 1978,79 and I remember spending countless number of one hundred yen coins as a university student. This served as the impetus for the computer game boom, and the game arcade industry completely shifted from the previous electric mechanical games such as pinballs and driving games to the new computer games. The reason for not regarding this as one of the innovations is because it was not intended and it cannot be reproduced. From the viewpoint of business management, this just implied " let's bet on everything because we don't know when innovation may take place", which is not a feasible theory.

In fact, another theme of the presentation is "how to manage innovation".

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It was Nintendo who came up with an idea of bringing the game to the homes, as you can see on slide 11. When Taito was enjoying its golden age with Space Invaders, Nintendo was doing not badly as a company. Back then piracy was becoming more rampant, making the business more and more difficult. Atari failed, but Nintendo believed that they had a shot in doing the home video game business, if they did it right. Hence, the family computer was developed based on some bold foresights. The result was a huge success. Home video games took on the market. After a series of trial and error, Nintendo built the home game console business model, which would stand for roughly the next three decades.

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